The subject vacant site is close to an operating sawmill. A comparable vacant site that is not close to a sawmill sold for $890,000. Paired land sales show a $150,000 discount for sawmill proximity. No other adjustments are necessary. What is the indicated land value of the subject?
Correct Answer
B) $740,000
Adjust the comparable toward the subject: $890,000 − $150,000 = $740,000. An inferior subject requires this downward adjustment to the comparable.
Why This Is the Correct Answer
Option B is correct because the comparable does not have the sawmill-proximity stigma that affects the subject, so the discount is subtracted from its price: $890,000 − $150,000 = $740,000. This adjusts the comparable toward the inferior subject.
Why the Other Options Are Wrong
Option A: $890,000
Option A, $890,000, is wrong because it is the comparable's unadjusted sale price and ignores the supported $150,000 stigma discount. The correct value is $890,000 − $150,000 = $740,000.
Option C: $1,040,000
Option C, $1,040,000, is wrong because it adds the discount ($890,000 + $150,000) as though the subject were superior. The subject is inferior, so the result is $890,000 − $150,000 = $740,000.
Option D: $590,000
Option D, $590,000, is wrong because it deducts the $150,000 discount twice ($890,000 − $300,000). Only one adjustment applies, giving $890,000 − $150,000 = $740,000.
Subject worse, comparable down
When the subject has the problem and the comparable does not, push the comparable's price down.
How to use: Use this to set the sign of nuisance or stigma adjustments.
Exam Tip
Work out which property is inferior from the facts given; that tells you the direction of the adjustment.
Common Mistakes to Avoid
- -Adding the discount to the comparable
- -Applying the discount twice
- -Adjusting the subject instead of the comparable
Concept Deep Dive
Analysis
This question tests the direction of a paired-sales stigma adjustment. The subject suffers sawmill-proximity stigma while the comparable does not, so the superior comparable's price is adjusted downward by the supported discount.
Background Knowledge
Proximity to nuisances such as industrial operations can create a negative external influence that reduces land value. Paired sales can isolate the market's reaction. In the sales grid, the comparable is adjusted to reflect the subject, so a comparable without the nuisance is adjusted downward.
Real-World Application
An appraiser values a rural home site near an operating sawmill that produces noise and truck traffic. Paired sales support a discount, which the appraiser subtracts from a comparable located away from the mill.
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